Pension News. Audit Commission Pension Scheme Newsletter Issue 19

Transcription

1 Pension News Audit Commission Pension Scheme Newsletter Issue 19 January 2015

2 Chair of Trustees report Welcome to the Trustees annual update on the Audit Commission Pension Scheme ( ACPS ). In this newsletter you will find news about the ACPS s financial activities for the year ended 2014 and events in the current financial year. It also includes membership statistics and other information concerning the ACPS and your benefits. The funding level of the ACPS has improved from 94% to 95%. This small improvement in the funding level is due primarily to an increase in the yields on the investments used to value the liabilities, which reduced the value placed on the ACPS s liabilities. This has more than offset the fall in the value of the ACPS s assets over the year. The next formal Actuarial Valuation is scheduled for 2015 to coincide with the planned closure of the Audit Commission. As in previous years, the ACPS remains relatively well-funded and able to meet its benefit commitments. In addition, members will recall that there is a Crown Guarantee which means that the Government would step in to fund ACPS pensions if they can no longer be met from its current assets. The term for the Member-Nominated Trustees is due to come to an end this year and an election will be held to fill these positions. We also bring your attention to pension scams which are sadly on the increase and provide more information on page 9. The Trustees continue to attend regular training sessions throughout the year to ensure that they remain up to date with legislative changes as well as best practices, and that we all comply with the requirements regarding trustee knowledge and understanding. I hope you will find this newsletter both interesting and informative. The Trustees would welcome any feedback on its content. Please provide this to the Punter Southall administration team for the Trustees to consider. Contact details are given on page 12. Finally, I would like to thank my fellow Trustees and all our professional advisers for the support provided to the ACPS over the last year. I look forward to continuing to work closely with them as we address the challenges which lie ahead. Sue Timbrell MBE Chair of the Trustees 2

3 Contents Actuarial Valuation 4 Trustees Report and Accounts 5 Membership movements 6 Investment report 7 Audit Commission closure 9 Member-Nominated Trustees 9 Pension scams campaign 9 Legislation changes 10 Who is involved with the ACPS? 11 Contact address 12 Noticeboard 12 MyPension.com 12 The material contained within this newsletter is for general information purposes only. Although every care has been taken in producing the content, it is not legally binding. Full details of the ACPS are set out in the Trust Documentation section of the ACPS Member Website, Should the newsletter content conflict with the Rules of the ACPS, the Rules will take precedence. 3

4 Actuarial Valuation The ACPS s financial position, or funding level, is the percentage of the ACPS s assets measured against its liabilities. The last formal valuation of the ACPS was carried out by the Actuary as at 31 March 2011, and an updated position has been estimated at 2012, 2013, 31 March 2014 and 30 September The next formal valuation of the ACPS will be carried out by the Actuary as at Indicative position 2011 actuarial valuation September 2014 Assets 665m 724m 812m 780m 829m Liabilities 641m 787m 864m 822m 872m Surplus/(Deficit) 24m ( 63m) ( 52m) ( 42m) ( 43m) Funding level 104% 92% 94% 95% 95% Note: the assets and liabilities shown above do not include the value of the ACPS s AVCs for this reason the asset value is slightly different to that shown in the Trustees Report and Accounts and elsewhere in this newsletter. Please note that the estimates as at 2012, 2013, 2014 and 30 September 2014 are not as accurate a calculation as carrying out a full valuation and are purely indicative. The Commission is contributing 18.5% of pensionable salaries to cover future build-up of benefits, life assurance premiums, and administrative expenses (plus an amount equivalent to the SMART contributions). Why has the position improved since 2013? Between 2013 and 2014 the position improved due to the increase in yields on the investments used to value the liabilities, which reduced the liabilities by more than the reduction in the value of the assets over the year. Crown Guarantee Under the terms of the Crown Guarantee, the Government will top up the assets of the ACPS to fund member pensions, if at the start of the ACPS year the Actuary believes that the assets have fallen below 150% of the benefits that are expected to be paid to members in the following year. With benefit payments running at around 30 million each year the ACPS s assets are clearly sufficient to cover benefit payments currently. While the position is reviewed each year under the terms of the Crown Guarantee, no payments are expected to be paid from the Government in the foreseeable future. Next Valuation Following discussions between the Trustees, the Department for Communities and Local Government ( DCLG ), the Commission and the Actuary it has been decided that the next full valuation should be carried out as at 2015 to tie in with the planned closure of the Commission in March This should ensure that the ACPS s investment strategy remains well matched to its future cash flow requirements. 4

5 Trustees Report and Accounts We set out below a brief summary of the key information from the ACPS s audited accounts for the year ending You can download the full annual report from the ACPS Website, or using your member access website The value of the ACPS s assets as at 2014 was 783 million. This has decreased over the year by 33 million from 816 million. These figures include money purchase funds in respect of members additional voluntary contributions (AVCs). Money movements during the year What was paid out? Benefits Transfers out and payments to leavers Life assurance premiums Administrative expenses Total 23.4 million 2.0 million ( 0.1 million) 1.0 million 26.3 million What came in? Contributions Transfers in from other pension schemes Other income Total 1.9 million 0.0 million 0.0 million 1.9 million What was the return from investments? *Please note that all investment income is reinvested within the scheme Investment income * Market value of investments Investment management expenses Total 0.0 million ( 8.6 million) ( 0.1 million) ( 8.7 million) The value of the ACPS (including AVCs) at 2013 was million Deduct paid out 26.3m, add received 1.9m, deduct negative investment return 8.7m Equals the value of the ACPS (including AVCs) at 2014 of million 5

6 Membership movements The change in the membership of the ACPS in the last five years is shown below Pensioners Deferred Active With regret We were very sorry to hear of the death of the following members: Marie Baldwin Brenda Brammer Alexander Brazil Sheilagh Cond Geoffrey Hughes Derek Mathers Brian Mitchell Jan Middleton Edward Pardoe Stuart Pearson Richard Peppler William Todd Gerald Whitfield 6

7 Investment report The Trustees primary objectives in investing the ACPS s assets are as follows: 1. A funding objective to ensure that sufficient assets are available to fund members benefits. Where the ACPS is in deficit, no recovery plan will be put in place. Instead, the ACPS is the beneficiary of a Crown Guarantee, whereby the Government will fund the ACPS pensions if they can no longer be met from assets. 2. A stability objective to maintain a stable level of funding within the ACPS. The Trustees recognise that the investment objectives listed above may conflict. There is a balance between achieving high returns and managing investment risk. During the year, the Trustees have sought to fulfil the investment objectives by investing in a range of assets which aim to both grow the value of the ACPS s assets, and match its liabilities. The latest available figures as at the time of publishing are dated 30 September The underlying holdings as at this date in the ACPS s Diversified Growth Funds were distributed as follows: Equities 33.1% Bonds 42.7% Cash 12.4% Alternative assets 10.3% Other 1.5% As at 30 September 2014: 21% of the ACPS s assets were held in a liability matching portfolio. This portfolio is designed to increase (decrease) in value when the ACPS s liabilities increase (decrease). 79% of the ACPS s assets were invested in Diversified Growth Funds. Diversified Growth Funds invest in a range of different asset classes and aim to: - exploit investment opportunities (by allocating funds to the most attractive asset classes); - control risks through investing in a range of asset classes; - produce stable investment returns in all economic environments. 7

8 The Trustees keep their investment strategy, and the investment managers appointed to deliver it, under regular review. As a result of these reviews, the Trustees made the following changes to the ACPS s investment strategy over the twelve months to 30 September 2014: The Trustees reduced the ACPS s exposure to Standard Life Investments Limited, following a senior staff departure. The ACPS disinvested from Barings Asset Management ( Barings ), which managed assets in a diversified growth fund for the ACPS. The decision to disinvest was taken following the departure of three senior individuals. While the Trustees interviewed managers to replace Barings, the proceeds of the Barings disinvestment (around 116.6m) were transferred temporarily to two of the ACPS s existing diversified growth managers (Ruffer LLP and Pyrford International Limited). The ACPS subsequently appointed GMO UK Limited ( GMO ) and approximately 137m was invested with GMO in December The Trustees removed the ACPS s exposure to global equities (which had previously been managed by F&C Investments). This followed a period of strong performance of global equities. In total, the ACPS made a profit of 15.5m since inception of the global equity exposure to disinvestment. Below we show the investment managers currently used by the ACPS and the amount of money being managed as at 30 September Please note, that since the 30 September 2014, GMO has been appointed to manage assets in a diversified growth fund on behalf of the ACPS. The value of the ACPS s invested assets increased over the twelve months to 30 September 2014 (by approximately 64m). All of the ACPS s assets produced positive returns over the year. Baillie Gifford & Co managed million of ACPS assets in a diversified growth fund. BlackRock Investment Management Limited managed million of ACPS assets in a diversified growth fund. Standard Life Investments Limited managed 58.0 million of ACPS assets in a diversified growth fund. Pyrford International Limited managed million of ACPS assets in a diversified growth fund. Ruffer LLP managed million of ACPS assets in a diversified growth fund. GMO UK Limited has been appointed to manage assets on behalf of the ACPS since 30 September F&C Investments managed million of ACPS assets in a bespoke fund. This included all of the Diversified Growth Fund investments listed above ( million) and million in a liability matching portfolio. 8

9 Audit Commission closure The Trustees have been and will continue to work closely with the Audit Commission and DCLG to ensure a smooth transition approaching and following closure. The Crown Guarantee will continue to apply post-closure. Member-Nominated Trustees The terms for all of the ACPS s Member-Nominated Trustees (MNTs) are due to come to an end this year. An election will be held to fill the vacancies later in Eligible individuals can stand for selection as an MNT by completing and submitting a valid nomination form during the nomination period. The term of office for all MNTs will be four years and at the end of that term they will be eligible to stand for re-selection. The election process and timetable will be issued to members in a letter later this year. Pension scams campaign The Trustees would like to bring to members attention that pension scams are on the increase in the UK. One-off pension investments, pension loans or upfront cash are being used to entice savers. If a member is taken in, they will lose most, if not all, of their savings. If you are over the minimum age of 55 (or age 50 if you joined the ACPS before 6 April 2006) you can ask the Trustees to pay your pension early. In this scenario your benefits would be reduced to take account of the early payment. You can also apply to the Trustees to receive your pension early due to ill health (this can be at any age). The majority of promises for early cash, other than from the Trustees or administrators will be bogus and are likely to result in serious tax consequences. Please check the facts before you make an irreversible decision. A lifetime's savings can be lost in a moment. The Pensions Advisory Service ( TPAS ) and HM Revenue & Customs ( HMRC ) have issued strong warnings about the potential risks of taking up pension liberation offers (sometimes referred to as pension unlocking or pension loans ) that claim to be able to release cash from your pension before you reach age 55. We are enclosing a copy of the TPAS leaflet A lifetime s savings lost in a moment to inform you of the warning signs of such offers. You can find more information from the following organisations about the consequences of these offers

10 Legislation changes In the budget on 19 March 2014, the Chancellor announced a number of changes to pensions. These largely relate to Defined Contribution arrangements (also known as money purchase), and not to final salary schemes (also known as Defined Benefit arrangements) such as the ACPS. This announcement did however change some of the limits which could affect ACPS members (although they are likely to only affect a very small number of ACPS members). Trivial commutation lump sums HMRC increased the trivial commutation limits from 27 March These are the maximum limits that apply to members whose retirement benefits are small enough that they could be received as a one-off lump sum. The trivial commutation limit was increased from 18,000 to 30,000. This means that for members where the value of their pensions from all sources (other than the State) have a combined value of less than 30,000 the benefits can be drawn as a one-off lump sum. In a final salary scheme, the amount paid is based on an actuarially calculated value of the annual pension (plus the value of the lump sum on retirement). For ACPS members this would mean having a pension at age 60 of about 1,300 a year, with no other pension savings elsewhere. There is also a separate small pots limit which was increased from 2,000 to 10,000. This means that any small pensions can be taken as a cash sum without taking into account other benefits held elsewhere if the value is less than 10,000. For ACPS members this would mean having a pension at age 60 of less than about 450 a year. Members with Standard Life AVCs HMRC allows members to receive up to 25% of the value of their benefits (including any AVCs) as a tax-free lump sum at retirement. If the value of your Standard Life AVC fund exceeds 25% of the value of your benefits (taking into account your ACPS lump sum) you would be unable to receive your AVC fund entirely as a tax-free lump sum. This is only likely to be the case if you have a very large AVC fund relative to the size of your annual pension. From 6 April 2015, if the proposed changes below are made, the ACPS would allow members at retirement to receive the excess amount of their AVCs in the form of a cash sum (which would be taxed under PAYE). Changes from 6 April 2014 As a reminder, the Lifetime Allowance and the Annual Allowance were reduced from 6 April The Annual Allowance (the amount you can save into a pension in each tax year) is now 40,000. The Standard Lifetime Allowance (the amount you can save across all of your pension arrangements during your lifetime) is now 1.25 million. If you exceed these allowances you may face tax charges from HMRC. Provisions were made available to protect benefits against the reduction in the Lifetime Allowance. You can find more information on HMRC s website Changes from 6 April 2015 The Chancellor announced a number of other changes taking effect from 6 April For members of Defined Contribution arrangements: Members will no longer have to purchase an annuity with their pension pots, and instead will be able draw down their funds (with 25% tax-free), with no restrictions on how this is done. All retirees will have a right to impartial guidance on their options at retirement the details of this are still being established. 10

11 Who is involved with the ACPS? Current Trustee Board Chair and Independent Trustee The Law Debenture Pension Trust Corporation plc. (Represented by Sue Timbrell) Member-Nominated Trustees Derek Elliott Pensioner Grant Patterson Deferred Pensioner Phil Parkin Pensioner Commission-Appointed Trustees Bharat Shah Deputy Chairman of the Commission Neil Swift Associate Controller Corporate Resources Steve Warren former Technical Director for the Audit Practice Professional services provided by: Secretary to the Trustees Debra McGuckin Punter Southall Ltd Lead Actuary Investment adviser Richard Akroyd Towers Watson Ltd Lane Clark & Peacock LLP Auditor KPMG LLP Legal adviser Hogan Lovells International LLP Administrator Punter Southall Ltd Guarantor The Secretary of State for Communities and Local Government Investment Managers Baillie Gifford & Co BlackRock Investment Management Ltd GMO UK Limited Pyrford International Limited Ruffer LLP Standard Life Investments LLP F&C Management Ltd Bankers Bank of Scotland plc 11

12 Contact address If you need more information about your own benefits or if you have a question about anything in this edition of Pension News, please contact Punter Southall. The address to use for correspondence is: The contact telephone number is: Punter Southall Queen s Quay Queen Square enquiries@acpensions.co.uk Bristol or visit BS1 4LU Noticeboard The Trustees have been asked to include the following statement in this newsletter: ACES (Audit Commission Ex-Staff) is a forum for former Audit Commission and District Audit staff to keep in touch. The 2015 annual reunion of ACES takes place on 2nd July 2015 at Stratford upon Avon. Come and meet friends and colleagues for a convivial get together plus dinner and overnight for those interested. A number of stalwarts are already committed and would love you to join them. The day will also incorporate the annual Hurle Hobbs golf competition. An informal gathering is also being arranged in London on May 6th to mark the closure of the Audit Commission. Further information on timing and location to follow via ACES, Facebook and Linkedin. If you would like to join either of these events then please Alison Rigg on alisonrigg14@gmail.com or alternatively participate in the ACES Facebook page. MyPension.com This is a new website available to ACPS members, providing more flexibility and choice in managing retirement benefits. If any member has not received letters giving details on how to access this service please contact Punter Southall. MyPension.com has been designed to offer you easy online access to your benefits and scheme information, providing you with the facility to carry out the following activities: View and update your personal details View your benefit statements View the value of your benefit Request quotations View your pension history Submit or update your nomination for receipt of any benefits payable upon your death The website can be accessed at Please use the following address for enquiries: enquiries@acpensions.co.uk 12